Ringgit Forwards at 2-Week High After Japan, Euro-Area GDP Drops

Ringgit forwards climbed to the strongest level this month after Japan’s economy unexpectedly shrank and the euro-area recession deepened, increasing the appeal of Malaysian assets.

The Southeast Asian economy grew 5.5 percent from a year earlier in the fourth quarter, after expanding 5.2 percent in the preceding three months, according to a Bloomberg News survey before data due Feb. 20. Japan’s gross domestic product contracted an annualized 0.4 percent in the fourth-quarter, while the euro-area’s GDP fell 0.6 percent from previous three months, according to official data released in Tokyo and Luxembourg today.

“Malaysia’s resilient growth should also keep its currency well-supported,” said Vishnu Varathan, an economist at Mizuho Corporate Bank Ltd. in Singapore. “Japan’s growth surprised on the downside.”

Twelve-month non-deliverable forwards appreciated 0.1 percent to 3.1519 per dollar as of 5:40 p.m. in Kuala Lumpur, the highest level this month, according to data compiled by Bloomberg. The contracts to buy or sell the ringgit in a year traded at a 2 percent discount to the spot rate, which fell 0.1 percent to 3.0911, the data show. Non-deliverable forwards are settled in dollars.

The ringgit earlier reached 3.0825 per dollar, the strongest level since Jan. 31. One-month implied volatility, a measure of exchange-rate swings used to price options, fell 15 basis points, or 0.15 percentage point, to 7.35 percent.

Germany, France

Economists surveyed by Bloomberg had predicted 0.4 percent growth in Asia’s second-largest economy and a 0.4 percent shrinkage in the euro area. Germany’s economy, the largest in Europe, contracted 0.6 percent last quarter, and French GDP dropped 0.3 percent.

Japan’s central bank kept its asset-purchase program unchanged at 76 trillion yen today. All 20 economists surveyed by Bloomberg News predicted no additional easing would be announced today. The BOJ last month pledged to begin open-ended asset purchases in 2014 to stimulate the economy.

Malaysian government bonds retreated. The yield on the 3.418 percent government bonds maturing in August 2022 climbed one basis point to 3.48 percent, according to Bursa Malaysia.

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